Deposit schemes fail to close rip-off loophole

The three tenancy deposit protection schemes have rejected our calls to close a loophole that enables rogue landlords to abscond with their tenants’ money.

Seb and I met the three government-backed schemes – MyDeposits, the Deposit Protection Service and the Tenancy Deposit Scheme – earlier this month to propose changes to prevent tenants’ money becoming unprotected should their landlord or letting agent be expelled from a scheme.

This meeting followed a Channel 4 News investigation in April which found that Daniel Burton, a rent-to-rent landlord, went out of business last year leaving over 160 tenants out of pocket. While he had protected their deposits through MyDeposits’ insurance scheme, which allowed him to keep the money in his own bank account, he was subsequently expelled from the scheme and his tenants were no longer protected.

Generation Rent proposed to the three deposit protection schemes that tenants’ money should be protected for the duration of the tenancy – not the duration of the landlord’s membership of the scheme – an approach backed by landlords on online forums. This way, if the landlord failed to comply with the scheme they would not put their tenant’s money at risk.

The schemes responded to Generation Rent in a letter today - this is what they said:

Dear Alex and Seb,

It was good to meet you both to discuss the issues raised in the Unida Place case.

As you are aware, deposit protection schemes operate in accordance with the Housing Act but we recognise that when landlords and agents fail to protect deposits that tenants’ money may be at risk.

Unida Place’s tenants ultimately ended up at risk because of the company’s failure to re-protect their deposits in accordance with the law. Where landlords and agents don’t comply with the legislation, tenants have the right to seek redress through the Courts where they may be awarded their deposit and up to 3 times the deposit value if non-compliance is proven.

We would like to reassure you that we are constantly reviewing our processes and procedures to ensure that tenant’s money is safeguarded under the terms of the law and where we feel improvements are necessary we will keep you informed as to any changes that we make.

In the meantime, we would like to take the opportunity to thank you again for meeting with us regarding this issue.

Yours faithfully,

Kevin Firth - DPS

Steve Harriott - TDS

Eddie Hooker - mydeposits

If there is the slightest chance that a landlord can steal a tenant’s deposit, a scheme simply cannot claim that they offer protection. It is clear that despite holding £3bn of tenants’ money the deposit protection schemes have been entirely captured by the landlord lobby.